North Carolina, Maine Reject Historical Horseracing Machines

May 31, 2023
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Efforts to legalize historical horseracing machines in North Carolina and Maine have come up short during their legislative sessions this year, as two more states struggle to allow the devices that bear a striking resemblance to slot machines but are technically not casino games.

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Efforts to legalize historical horseracing (HHR) machines in North Carolina and Maine have come up short during their legislative sessions this year, as two more states struggle to allow the devices that bear a striking resemblance to slot machines but are technically not casino games.

The Senate Commerce and Insurance Committee amended the bill last week to authorize pari-mutuel wagering on horseracing, which was specifically excluded from the House version of the legislation. The decision also opened the door to regulating HHR terminals.

But on Tuesday (May 30), the Senate Rules and Operations Committee quietly stripped HHR from an amended version of House Bill 347 without comment before approving the measure legalizing mobile sports betting in North Carolina.

The bill now heads to the full Senate where it could be voted on as early as Wednesday (May 31).

In Maine, the Joint Committee on Veterans and Legal Affairs tabled Legislative Document 1992 on May 24, one day after it was introduced by Representative Benjamin Collings, a Democrat, meaning that the bill will not pass the legislature this year.

Also known as instant racing machines, HHR devices use historical racing data instead of a random number generator, thus qualifying as a pari-mutuel product under federal law.

The terminals allow wagering on videos of past horse races where the names of the horses and jockeys remain unknown until after a wager is made and the video starts.

North Carolina and Maine are not the only states that have been unable to legalize HHR machines in recent years.

The California Horse Racing Board considered the idea of HHR machines to aid tracks in the Golden State in 2017, but eventually tabled the idea over legal and legislative hurdles, as well as opposition from tribal casino operators.

In November 2018, Idaho voters defeated Proposition 1 that would have legalized the terminals at racetracks in an effort to revive a once vibrant racing industry.

The Idaho legislature legalized the machines in 2013 but the legislature repealed its authorization two years later after finding the terminals were more like slot machines, with a tiny screen only showing the final seconds of a horse race.

Republican Governor Butch Otter, who served from 2007-2019, vetoed that bill in April 2015, but the Idaho Supreme Court ruled the governor did not return the vetoed bill to the state Senate within the state constitution’s required five-day time limit, allowing the ban to become effective.

KY HHR revenue

Historical horseracing machines have generated hundreds of millions of dollars for racetrack owners and state budgets in the states where they are legal.

Louisiana and New Hampshire became the fifth and sixth states to legalize the terminals in 2021, with Kansas following suit a year later. The Kansas Racing and Gaming Commission in July will select one of three applicants, including Boyd Gaming, to operate an HHR facility in Sedgwick County, near Wichita.

The other states where HHR machines can be found are Arkansas, Kentucky, Virginia and Wyoming.

HHR has provided a lifeline to Kentucky’s storied horseracing industry generating $6.8bn in wagering activity last year, while in low-population Wyoming, the machines posted $1.3bn in wagers in 2022.

Both states tax HHR revenue at lower levels than the 10 percent tax proposed in Maine. In Kentucky, the tax is 1.5 percent of handle, while in Wyoming it is 1.9 percent.

Despite the challenges in getting lawmakers to approve the machines in additional states, Bill Carstanjen, CEO of Churchill Downs Incorporated, recently expressed confidence in HHR’s long-term viability, especially in supporting the existing racing business and generating additional tax revenue.

Carstanjen confirmed during a first-quarter earnings conference call last month that HHR are a key strategic focus over the next five to ten years for Churchill Downs as the company looks to expand its existing footprint.

“We have developed high growth, high margin investments in this segment with excellent returns on capital, and we will seek to build on that track record in Kentucky, Virginia, New Hampshire, Louisiana, and perhaps beyond,” Carstanjen said.

He also confirmed the company was working towards the goal of conducting HHR referendums in two new Kentucky communities in the fall. Carstanjen said he would share more details about the referendums on the company's next earnings call in July.

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